by Julie Martin
Australia and the UK have asked G20 nations to join them in an effort to stop the diversion of profits by multinational enterprises, in an initiative designed to go “further and faster” than the OECD’s base erosion and profit shifting (BEPS) plan, Australia’s treasurer, Joe Hockey, said April 19.
Hockey and British Chancellor of the Exchequer George Osborne used last week’s G20 meeting in Washington to announce they will form a senior officials working group, open to all G20 countries, to develop measures to stop multinational enterprises from diverting profits away from their host countries.
The group, which will form following the UK’s May 7 general election, will build on the UK’s experience of introducing a diverted profits tax.
“Whilst we recognize that the OECD is undertaking work which Australia initiated and promoted last year, we obviously want to go further and faster,” Hockey told ABC television on April 16.
The move follows a plea by the OECD’s Pascal Saint-Amans for Australia to wait for the release of OECD BEPS guidance, slated to be complete in October, before adopting any unilateral measures to combat BEPS. Saint-Amans, who is director of the OECD Center of Tax Policy and Administration, told an Australian Senate References Committee hearing April 8 that Australia will be better informed to act once the BEPS action items are finalized, that BEPS issues are easier to fix in a coordinated fashion, and that unilateral action will increase risks of double taxation.
According to Hockey, though, the new initiative will not conflict with OECD BEPS work.
“The OECD, through its base erosion and profit shifting program, is trying to set up consistent global definitions and rules in relation to companies. We welcome that. We are going to the next stage, which is to go after those companies, particularly individual companies that are not paying the proper amount of tax where they earn the income,” he said.
Hockey added that OECD Secretary-General, Angel Gurria, confirmed that the OECD BEPS measures do not cover diverted profits in the same manner as the new UK law.
“The whole world needs to work together and by the United Kingdom and Australia coming together on this initiative, we are going to lead the world and work with the OECD and the G20 to ensure that companies pay the proper amount of tax where they earn the income,” he said.
Hockey also said that Australia will not adopt a new UK-style diverted profits tax, but instead intends to “beef-up” its existing tax rules to stop multinationals from diverting profits away from Australia.
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– Julie Martin is a US tax attorney and a member of MNE Tax’s editorial staff.
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